Allegations of corruption, nepotism, waste, flagrant mismanagement, bribery,
conflict of interest, nonexistent accountability and concealment of documents by
senior administrators at Israel’s thirdlargest health fund, Kupat Holim
Meuhedet, were disclosed on Monday afternoon in a 286-page special report by
State Comptroller Micha Lindenstrauss.
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The report, which is highlighted
by his call for the establishment of a state committee to investigate the health
fund that insures over a million Israelis, was called an “earthquake” by health
system experts, even though the first signs of malfeasance were reported three
years ago by a Health Ministry deputy director-general responsible for
supervision of the health funds.
Lindenstrauss said, when presenting
copies of the hefty report to the Knesset and the Health Ministry, that it was
one of the most serious reports that he had issued in five years in his post.
Veteran staff members in his office said it was one of the most serious released
by the office in decades.
Although most of the report focuses on
Meuhedet, it has implications for the three other health funds – Clalit Health
Services, Maccabi Health Services and Kupat Holim Leumit. These three funds
still have the legal status of “Ottoman societies” based on laws going back to
Turkish rule in 1903, and are not required to have independent boards of
directors to supervise them.
The affair will likely lead to requirements
that all four be supervised by boards with independent, public and professional
representatives rather than “puppets” affiliated to management, union
representatives and other nonobjective parties.
does not call outright for the resignation of the Meuhedet officials he mentions
by name in the report, he does call on them not to “hold on to the horns of the
altar,” a biblical reference to desperate people going to the “protected” altar
in the Temple who sought protection from punishment by men who sought them
“It is not a health fund [kupat holim],” suggested one experienced
health system observer who read the report.
“It is a Pandora’s box full
of vermin [kupat shratzim].”
Deputy Health Minister Ya’acov Litzman
issued a twosentence comment, saying he had received the report and issued “an
immediate order to establish a professional team headed by director-general
Ronni Gamzu for dealing with the matter in accordance with the law
and the rules of proper management.”
Litzman also said he would “wait for
decisions that will be made in the health fund board of directors in accordance
with the State Comptroller’s Report.”
The allegedly illegal dealings are
believed by the State Comptroller’s Office and others to involve hundreds of
millions or even billions of shekels and dozens of administrators, including Meuhedet director-general Shmuel
Muallem; his predecessor, Uzi Salant, who headed the fund for 30 years and
received a huge pension; its chief pharmacist George Shriki; Meuhedet Council
member Tzvi Lemberger; and Jerusalem district director (and former marketing
director) Yehuda Eliash.
Also mentioned by name is health fund chairman
Rabbi Yerahmiel Boyer, a former mayor of Bnei Brak, who is described in the
report as having failed in supervision and control.
Meuhedet is regarded
as having developed a “culture of thievery and deception” over the last decade
and even more, according to the report.
The comptroller devoted oceans of
green ink to highlight serious findings throughout the report, which focused on
six criticisms of Meuhedet.
His office also examined the three other
health funds, but they were found, by comparison, to have only negligible
Senior health fund administrators, among them those at
Meuhedet, are – according to annual Treasury reports – among the highest paid
people in the public sector, with salaries reaching NIS 60,000 a month or
Gamzu on Sunday sent a stern letter to Boyer declaring that the
comptroller’s report “reveals significant and extreme failures in the running of
the health fund, its officials and its institutions.
We have learned that
some findings have been sent to the Attorney- General’s Office during earlier
stages of the comptroller’s work and include allegations of criminal
The ministry director-general continued in his letter that a major
assessment of the findings was required, and that there could be a complete
reshuffle in Meuhedet’s management in the future.
He gave the Meuhedet
chairman 10 days to convene a meeting of his 15-member board, hold a discussion
and make decisions; Gamzu demanded an immediate response on when this meeting
would be held and a full protocol of the session, with detailed decisions and
timetables for their implementation.
Meuhedet management’s spokesman
issued a terse comment on the comptroller’s report, saying the fund regarded
“the criticism – and all criticism – as vital and deserving serious
consideration. [We] will study the details of the report and take action to fix
the shortcomings that remained after the period covered by the
“Serious as the failures are, they do not deny two central
facts: That Meuhedet is the only health fund whose management presented
financial stability for the benefit of its members; and members have for many
years enjoyed continuous excellent services. All government and independent
surveys have shown the highest level of satisfaction (among the four health
funds), including during the period studied by the report.”
arrested by the Israel Police last week and remanded by the Rishon Lezion
Magistrate’s Court for questioning by the police’s National Fraud Unit and Lahav
433 unit, as well as the Israel Tax Authority.
Eliash has denied the
allegations, which include that he awarded, through illegal tenders, large
Meuhedet contracts to companies owned by his close relatives.
health fund officials are to be questioned by police soon.
founded in 1974 as a private health fund that merged the Amamit health fund
established in 1931 by Hadassah Hospital physicians and a smaller health fund.
It offered an alternative to residents who did not want to join the Histadrut –
or were not accepted by it – which was required in order to be covered by the
labor federation’s Kupat Holim Clalit.
Since 1995, all health funds are
required to accept as members anyone who wants to join.
with a NIS 4.2 billion annual budget, serves over a million people. It is
particularly strong in Jerusalem, but has indeed received high grades for
service from members around the country.
This seeming contradiction
between a high level of medical services and suspected widespread corruption was
explained to The Jerusalem Post
by a senior State Comptroller’s Office
Meuhedet regards haredi families (and to a much lesser extent,
Arab families) as very profitable for it. While they have many children, the
National Insurance Institute, not the funds, covers all hospital delivery costs,
and these families are younger and healthier on average than
Haredim are also less aware of the expensive medical
services available in the health basket and don’t generally demand them. Haredim
constitute 40 percent of Meuhedet members in Jerusalem, and they bring money, in
the form of health tax, to the health fund.
As Meuhedet made significant
profits on haredi members, it had extra income to spend for illegal and
unapproved purposes, including paying for the illegal transfer of residents from
other health funds to itself.
To attract even more haredim, Meuhedet
managers hired macherim (freelance contractors) to bring in large numbers of
haredi families and yeshiva students in well-organized synagogues and
neighborhoods in exchange for benefits, including cash payments.
thousands of haredim were apparently induced by these macherim to switch from
other insurers, mostly Leumit, to Meuhedet.
According to the National
Health Insurance Law (1994), individuals may join a health fund or switch
insurers solely by registering in person, and health funds are not permitted to
offer material favors to induce groups of people to join.
also set strict limits on the health funds’ marketing expenses, so that large
sums would not be wasted on advertising, prizes and other benefits and would
instead be used for health care. As a result, Meuhedet in Jerusalem allegedly
manipulated the books so that marketing budgets seemed to have been spent on
transport of blood tests to labs by messenger services.
organization” called Lema’an Yerushalayim, which is a clinic in the capital’s
haredi Geula neighborhood, was set up in 2004 to provide clinic services to area
residents, while in fact Meuhedet covered all the clinic’s expenses. Lema’an
Yerushalayim was headed by Lemberger, who later became a member of the Meuhedet
Council as a Jerusalem district representative.
This clinic was also
given money for “marketing,” but according to the report, this money was used by
the organization for financing yeshiva students, interest-free loans, helping to
marry off poor haredi brides and providing matza and other Pessah food for the
Thus NIS 2 million went for these nonmedical uses without the
Health Ministry knowing of it. Recently the ministry discovered this, and
ordered Meuhedet to stop spending for these purposes.
Also according to
the report, money from Meuhedet’s supplementary health insurance fees were
illegally diverted to various purposes, including marketing.
supplementary health insurance income cannot be used by the health funds for any
purpose other than to provide health services.
Over 85% of Meuhedet
members take out these policies (such as Meuhedet “Adif” or “Si”) at extra cost,
to be entitled to services not covered by the health basket; they were
unknowingly subsidizing these criminal activities.
The comptroller notes
in detail that Shriki, who while serving as Meuhedet’s chief pharmacist (and
getting a salary of NIS 110,000 a month), also runs his own private pharmacy in
Jerusalem. He allegedly brought three health fund pharmacists to work in his
establishment, their salaries paid by Meuhedet.
Shriki also allegedly
kept a “private health basket” of medications not included in the official state
health basket – which he collected from pharmaceutical companies – and gave them
to friends or acquaintances for free.
He also illegally accepted luxury
foreign trips for health fund pharmacists, managers, doctors and even drivers at
the pharmaceutical companies’ expense.
Health system experts noted that a
serious problem in supervising the health fund is that doctors and others who
received undeserved benefits had no interest in filing complaints against
Dr. Yoel Lipschitz, a lawyer by profession and since 2006 the
Health Ministry’s deputy director- general responsible for supervising the four
health funds, told the Post
on Monday that the report is full of “severe
failures. We can’t be apathetic to it. Action must be taken, and supervision
must be stronger and and tighter. Every document Meuhedet sends to us will from
now on be examined from all angles.”
But he added that his responsibility
at the ministry, where he has only three assistants, is “to be a guard dog, not
a canine hunter of criminals. I set up traffic lights on their paths.”
was not told to regard everyone in the health funds as having violated the laws,
he said, but to check reports and supervise to the best of his
His immediate predecessor, who was also responsible for
preventing such long-term irregularities, was Michal Abadi, who left in 2006 to
manage a large employees’ provident fund.
Lipschitz said that if these
tens or hundreds of millions of shekels allegedly stolen and wasted by health
fund officials had been used by Meuhedet to supply lifesaving medical
technologies for members who could not receive them as part of the official
state health basket, the complaints of these members would have been
The only blame Lipschitz was willing to accept was that when
Treasury proposals to change the health funds’ legal structure and thus its
supervisory mechanisms were raised, “I thought it was technical and a waste of
But these legal loopholes allowed Meuhedet managers to pull the
wool over the eyes of the ministry and the public.
Kadima MK Rachel
Adatto, a physician, lawyer and medical administrator, told the Post
police is bound to investigate all criminal allegations.
“It is not our
problem. What we in the Knesset must do is pass legislation that will change the
supervision process in the four health funds. They cannot supervise themselves
in the amateur way it has been done.”
Two years ago, she continued,
Meuhedet and other health insurers successfully lobbied in the Knesset to drop a
section of the economic arrangements bill that would have changed the
supervisory system so that they become accountable and transparent, like
“They must have independent boards of directors with
experts and public representatives. I will very soon present such a private
member’s bill to the Knesset,” said Adatto.
While the state comptroller
voices clear and serious criticism about the lack of adequate Health Ministry
supervision of some health fund operations and hints at others, Adatto said she
did “not blame the Health Ministry” for the report findings.
of officials cannot supervise the powerful health funds,” she said. “They’re too
big for this. The health funds need corporation-like supervision and
Israel Medical Association chairman Dr. Leonid Eidelman said he
was shocked by the report.
“It is an explosion in front of our very eyes.
Clearly, the accusations must all be investigated,” he said.
added, “while it is good the comptroller raised the issue, the whole public
health system is in danger, because in the past decade or so, the government has
adopted a policy to dry up the public system. It allocates less and less funding
for it, thus requiring the individual to pay more and more for services
National health expenditures have remained at a steady 7%
to 8% of the Gross Domestic Product since the 1990s, while medicine has
transformed itself with expensive new technologies, Eidelman added. The health
funds increasingly operate under severe economic and political
“They are in an impossible situation.
They have to make
decisions about patients with economic and not just medical considerations in
mind. They have become economic bodies that have to constantly market
themselves. The whole health system must be examined.”
As many of
Meuhedet’s largely self-employed physicians are not Israel Medical Association
members, Eidelman had not received any complaints from them about goings-on in
the health fund.
Among the government’s options is to appoint a
management committee of its own to run Meuhedet, just as failed municipalities
are sometimes run by nonelected officials until they can recover
Meuhedet members could, in theory, petition the High Court
of Justice against the health fund or could apply for class-action status and
sue failed administrators who said they could not afford lifesaving medical
technologies while living it up themselves.
It remains to be seen whether
large numbers of generally happy Meuhedet members will switch to other funds, to
protest against the corruption or out of fear that chaos may soon reign, and the
fund would not be able to continue with the same high level of
Kupat Holim Leumit, whose former owner, the National Workers
Labor Federation, was chaired by Avraham Hirchson, who resigned as finance
minister and is now serving a 5.5- year prison sentence for stealing nearly NIS
2m. from the federation, is now cleaning up its act.
director-general, Nissim Alon, has signed a recovery plan that has put Leumit on
the path to transparency and improved supervision.
Services, the second largest fund, has consistently shown high levels of
reliable management, while the largest fund, Clalit Health Services, has
improved its services, management and supervision in recent years.
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